Final recommendation under paragraphs 3.2 and 3.7 of the Code on the adoption of self-laid assets by Water Companies in England 7 October 2019

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Contents

1. Introduction ...... 3 1.1. Customer Consultation ...... 4 1.2. Principal changes since April documentation ...... 5 1.3. Meeting Ofwat’s requirements ...... 6 1.4. Further work ...... 6 1.5. Consensus ...... 6 1.6. Code compliance ...... 8 2. Further development of the asset adoption arrangements ...... 9 2.1. Matters for the Panel ...... 9 Appendix A – Customers attending consultation meeting 6 June 2019 ...... 10 Appendix B –Attendees at meeting on 21 August ...... 11 Appendix C Detailed changes to Design and Construction Standards documentation 13

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1. Introduction

This document accompanies the documents being submitted by Water UK on behalf of its members in response to Ofwat’s Code for Adoption Agreements as this relates to water infrastructure. The documents being submitted are: a) Water Sector Guidance (WSG) and its appendices: • A (included in WSG) - Definitions • B-not used • C-Procedures • D-Design and Construction Specification • E-Minimum Information requirements • F-Model Water Adoption Agreement • G-Levels of Service • H-Terms of Reference for the water Code Panel; and b) Spreadsheet of comments received from Ofwat on previous version of documents dated 19 April 2019 including response from Water UK demonstrating how those comments have been addressed

A master spreadsheet of comments received in response to consultation of 27 August 2019 with details of Water UK’s response to these comments will follow shortly. In relation to the recommendation that Water Companies are obliged by the Code to present to Ofwat, the Code provides as follows: 3.21 Water Companies must work together in order to produce a recommendation to Ofwat concerning the draft Water Sector Guidance and Sewerage Companies must work together in order to produce a recommendation to Ofwat concerning the draft Sewerage Sector Guidance. Each recommendation must set out, in writing: (a) whether Customers have been consulted, providing examples to evidence the extent of their involvement; (b) whether the draft Sector Guidance reflects broad consensus of opinion amongst Customers and the Water Companies or Sewerage Companies as applicable. Where this is not the case the recommendation must set out where those parties have differing views and the reasons for following one view over an alternative view; and (c) confirmation that there has been compliance with this Code in producing the draft Sector Guidance. 3.2.2 Where possible, the draft Sector Guidance must reflect broad consensus of opinion amongst Customers and Water Companies or Sewerage Companies as applicable.

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An equivalent section deals with the MWAA. The following sections of this document address those requirements.

1.1. Customer Consultation

Since the first recommendation from Water UK in response to the Code on 7 January 2019 (“the initial recommendation”), the following opportunities have been given to Customers to consider and comment on the water sector’s proposals: 1.1.1 Stakeholder meeting on 6th June

This meeting focussed on the principal changes being proposed by Water UK to the first set of documents submitted to Ofwat, in particular: • changes to the MWAA • proposal by Water Companies to commit to a fixed date for the delivery of a source of water • extent of changes to the design and construction specification document.

These changes were positively received at the meeting. A list of SLPs and developers in attendance is set out in Appendix A. 1.1.2 Meeting with Fair Water Connections on 29 July

At this meeting, FWC were invited to provide comments on all documents, then in draft form. A substantial number of comments were made on the DCS and MWAA. 1.1.3 Consultation session with Customers on 21 August

During this session, the authors of the principal documents gave presentations on the changes that had been made to those documents and invited comments. This was intentionally done before the draft documents were circulated to avoid criticism that the documents were in too settled a form to be changed in response to comments. Customer feedback at that session indicated that they were pleased with the changes, subject to reading the detail and reviewing the drafting. A list of attendees at the 21 August session is set out in Appendix B 1.1.4 Formal consultation from 27 August to 18 September

This consultation resulted in a total of 23 responses with 439 individual comments being made. Of these, 249 are unique, ie, not repeated in others’ submissions. While we are still calculating how many of these comments have resulted in changes to the documents, the total is around 50%. Note also that some comments were not ones which could be addressed by documentation changes.

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1.2. Principal changes since April documentation

Following the April comments of Ofwat and in response to comments from stakeholders, Water UK has made a series of major changes to the documentation. In summary form, these changes are as follows. 1.2.1 MWAA The Adoption Agreement now provides for a fixed delivery date for a source of water for testing (as defined), in response to one of the principal criticisms made of the initial documentation. This will require companies to start work to plan for delivery on the due date, before the adoption agreement is entered to. While it will be open for Water Companies to seek assurances from SLPs that they will reimburse the costs of abortive work if an agreement is never entered into, this change represents a significant shift of liability onto the Water Companies. The commitment to a contractually binding delivery date should operate to substantially alleviate SLP concerns about ‘control point’ inspections. Requiring an SLP to delay its on-site activities for the Water Company to inspect will not delay the contractual delivery date. As such, inspections are carried out at the companies’ risk. Changes have also been made to the process for defect correction. In response to requests from SLPs at the 6th June meeting, there is now a presumption in favour of the SLPs carrying out defect correction work, except in very limited circumstances. Previously, this was entirely at the discretion of the Water Company. Finally, detailed changes have also been made to clarify the relationship between the different regimes providing redress to customers in the event of default by Water Companies; namely redress under the WSG, contractual liability under the MWAA and redress pursuant to companies’ complaints procedures. 1.2.2 Design and Construction Standards The main criticism of this document was that it was not sufficiently harmonised and left too much discretion to individual companies. Appendix C sets out a list of sections in respect of which further work has been carried out. It will be noted that in many cases, it has been possible to provide for a single approach rather than allowing for company discretion. The scope of the document has also been expanded to deal with both design and construction. It was this that led to our renaming the documentation as a “specification” as we are now specifying in some detail what works will qualify as adoptable pursuant to the . 1.2.3 Procedures These have been reviewed in their entirety, partly to ensure that the terminology used is consistent with the other documents and partly to simplify their operation.

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1.3. Meeting Ofwat’s requirements

We are submitting separately a table showing the sector’s responses to Ofwat’s table of comments of 19 April 2019 in relation to the documentation initially submitted to Ofwat in January 2019. This table shows how each of those issues has been addressed in the revised documentation. We regard this revised documentation as fulfilling Ofwat’s requirements as expressed in the April 2019 table of comments.

1.4. Further work

We consider that most of the documents that we are submitting will not require any further improvement after the new regime comes into force. We consider in section 2 further work that could be carried out through the Panel process. Independently of the Codes process, Water UK is also working to assess how current arrangements for accreditation might be improved. Some stakeholders consider that there is a material disparity between the ways in which the competence of Water Companies’ contractors and SLPs is judged. In their view, this has a number of anti- competitive consequences. Some companies have already taken steps to help reduce any such disparities and this project will consider whether a national approach could be taken. The initial conclusions of this work will be available at the next WIRS Forum meeting on 23 October.

1.5. Consensus

In the consultation of 27 August, the following question was posed: Despite any suggestions for changes you may have made, are you broadly in agreement with the water sector’s proposals to implement the Ofwat code? In response to that question, none of the SLP respondents expressed themselves to be “broadly in agreement”. On that basis we cannot say that the documents we are submitting reflects “broad consensus of opinion” as referred to in the Code. In some ways this is a surprising conclusion. In large measure, the comments of stakeholders on the initial recommendation have been taken into account. The changes referred to in section 1.2 were all made in response to stakeholder comments and we note that at the meeting in June, none of the stakeholders opposed the changes we outlined at that meeting or suggested that Water Companies had not answered their criticisms. We would also note that none of these changes have been criticised in the responses to the August consultation. It is also, in our view, unfortunate that stakeholders have indicated their dissent in this way in circumstances where there exists a robust process for proposing and making further improvements to the documents; ie, through the mechanism of the Codes

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Panel. That Panel has now been constituted and will be ready to start work on such improvements immediately after the new arrangements enter into force. Thirdly, most of the individual comments are points of detail which we do not see as preventing consensus on the broad scope of the Water Companies’ proposals. We have responded to these individual comments in the master spreadsheet to which we referred earlier, specifying where we have preferred one view over another. In many cases we have been able to accept the proposed change. Finally, some of the issues which have been presented as reasons for not agreeing with the current proposals are, in our view, out of scope. In considering the issue of consensus, it may be helpful to respond to the comments of Fair Water Connections (FWC) in the section of its response dealing with issues blocking acceptance.

1.5.1. Addressing alleged anti-competitive discrimination between self- lay and corresponding company provision by requisition The issue of any such alleged discrimination is outside the scope of the Code and on that basis, has not been dealt with by Water UK in the current documentation. We are however examining these concerns in a separate project as noted earlier. We do not believe that such concerns are a legitimate reason for disagreeing with the proposals we are making to respond to the Code.

1.5.2. Need to enhance redress provisions The redress procedures proposed in August were substantially identical to those presented in the initial recommendation and which we had understood to be broadly acceptable. The topic has not been commented on at any stage since then-until now. We fail to understand how the changes suggested by FWC would improve these provisions. Customers have repeatedly told us that dealing with the problem is more important than receiving any form of monetary compensation. The redress procedures therefore focus on this. Accordingly, we do not accept that there is any disincentive to using those very procedures as is suggested by FWC nor do we understand how requiring a company to provide interim/temporary supplies responds to the range of failures that may give rise to redress. Finally, we have for the first time made a contractual commitment to the all-important delivery date and have provided for two mechanisms under which losses can be compensated (see section 1.2.1).

1.5.3. Restrict flexibility through procedures not being mandatory The procedures are mandatory. They are binding pursuant to the Code and non- compliance will be a matter for regulatory enforcement. We do not however consider that the procedures have been developed to a point where they can be binding as a matter of contract.

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There is scope for the procedures to be revised so that they are consistent with the other Code documentation and at that stage, it may be appropriate to require compliance with them under the MWAA. This will need further analysis and consideration. By their nature, procedures are not well suited to being contractual obligations as they provide a guide to the operation of very complex “on the ground” interactions rather than a precisely defined (or indeed definable) set of legal obligations. The current procedures nonetheless provide a useful ‘process map’ setting out the different stages of the process and a guide to activities of the parties. Given that there has not previously been a single set of procedures, we believe that the better approach is to implement the Code now with the current procedures and examine in the light of experience whether and, if so, how they might be improved.

1.5.4. Require company specific documentation to be readily available We have added a requirement to this effect in the WSG.

1.5.5. Redraft the DCS FWC refers to submitting changes to customers and making “all necessary changes required by customers”. With respect to FWC, this misunderstands the way in which the Code operates as it is not a requirement of the Code for Water Companies to implement such terms as Customers may require. The scope of work being proposed by FWC is significant. As noted earlier, the DCS has been subject to extensive changes since the initial recommendation with a view to clarifying it and reducing the opportunity for individual company variations. Again, we consider the better approach is to await publication by companies of their company-specific versions of the DCS and to use those as the basis for considering improvements to the document-including reducing the scope for individual company approaches.

1.6. Code compliance

The 4 October press release from FWC refers to “the many shortcomings” in what the sector is recommending and to completing proposals which fully comply with the Code. While the sector expects further development of these initial proposals through the Panel process, the documents now proposed are both workable and a significant improvement on current arrangements. Most importantly, we confirm that we consider the draft WSG to comply with the Code.

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2. Further development of the asset adoption arrangements

2.1. Matters for the Panel

This section proposes other areas of activity that could be put to the Panel should any party wish to make Change Proposals to this effect. • Development of a full suite of Minimum Information requirements, possibly with the support of consistent national forms • Liaison with WIRSAPP to determine how further work could be included in the scope of its accreditation scheme • A programme under which Water Companies will publish their general land rights criteria • Development of the Template Design and Construction Standards (TDCS). It has been suggested that companies could look for areas of convergence and consider re-publishing the TDCS where there is agreement with yellow sections filled in where convergence exists on a part of the TDCS. Where areas of convergence don’t exist, the Panel could help to establish “best practice” and ask Water Companies to consider what they can do to converge on areas that are for non-operational issues. • Improvements to the Procedures documentation to ensure their consistency with the other documentation.

We note that Ofwat has requested that a detailed programme of work be presented to the Panel. While we are happy to indicate areas of possible work, as we have done above, we do not however consider it appropriate to specify now what matters should be put to the Panel once it comes into operation as this might adversely affect other parties who might wish to propose Change Requests.

Water UK 7 October 2019

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Appendix A – Customers attending consultation meeting 6 June 2019

Martyn Speight -FWC Lee Crabtree-Energetics Patrick J Daly – P N Daly Gary McConnell-Aquamain; Jonathan Buxton- PDI Utilities; David Topping -Triconnex; Neil Buckley- M and S Water; Ben Brownbill IGL; Kieran Walker- HBF Damian Hill-Persimmon;

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Appendix B –Attendees at meeting on 21 August

Water Code Attendees Adoption Bishop Robin Bishop Technical & Development Services (T-D-S) Bower Simon Bower Triconnex Brewer Zoe Brewer Consultant Burgess Chantal Burgess Crabtree Lee Crabtree Energetics Daly Patrick Daly P N Daly Darrington James Darrington Davies Gareth Davies Durant Parris Durant South East Water Giles Laban Giles CIUS Green Lee Green Griffiths Jim Griffiths Veolia Water Heer Ravandeev Heer Hill Sue Hill Hollamby Chris Hollamby South East Water Hutchinson James Hutchinsn Ions Lindsey Ions Thames Water Lee Chris Lee CIUS Martin Nigel Martin Maxwell Julie Maxwell Northumbrian Water McCrickard Ian McCrickard Northumbrian Water McDonald Frank McDonald Energetics Quinn Dawn Quinn Severn Trent Water Scott Jordon Scott

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Seddon Gemma Seddon United Utilities Sloan Mike Sloan South Staffordshire Water Speight Martyn Speight Fairwater Connections St John Tim St John Strang David Strang Water UK Thornley Mike Thornley Topping David Topping Triconnex Tregale Alison Tregale South West Water Vasant Ravi Vasant SES Water Whitehouse Mark Whitehouse Lloyd’s Registers Williams Robert Williams IWNL

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Appendix C Detailed changes to Design and Construction Standards documentation

Amendments made since the meeting held 6th June at Water UK. Headline changes • Target Date for connection amended to Delivery Date • Clarifications and rationale added to Activities classified as Green, Amber and Red relating to the ACS Table • Section 10.1 Permissible Materials included • Section 10.3 Suitable Point of connection/Point of Adequacy Connection; clarification added on responsibility for costs, should there be capacity of site specific restraints, including the condition of the assets) • Section 10.3, section added to clarify designer’s responsibilities for incorporating spine mains as necessary to allow for additional development or phases. • Section 10.7.2; Minimum pressure at hydrant of nodal point on the system standardised. Responsibility of SLP Designer to state where a component has been used below the Adopting Water Company’s standard pressure • Section10.8; contaminated ground guidance standardised, link included to Water UK website • Section 11.1 Design Accreditation; statement standardised • Section 11.2 Routing and Positioning principles; section standardised on the process for agreeing deviations, allowing flexibility from NJUG if required • Section 11.3 Depth of mains standardised • Section 11.4 Water Quality Considerations; text standardised with days for turnover to be edited accordingly by the Water Companies for their specific requirements • Section 11.6 Controlling valves and valve operation; section added to allow Water Companies to insert their policy on valve operations by third party, allowing flexibility by a local practice • Section 11.9 District metered areas(DMA) and Boundary Boxes; text added to confirm who is responsible for the costs relating to installing meters and the associated constructed works. • Section 11.1 Double standard valves, standardised statement added • Section 12.2 depth of services standardised • Section 12.3 Section added for Water Companies to insert standard service size to a domestic property • Section 13.1 General, standardised standards and requirements added • Section 13.2 Standardised CESWI requirement • Section 13.3 Standardised CESWI requirement

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• Section 13.6 Ducts; clarification statement added • Section 14.1 Standard domestic metering for individual dwellings; section added for Water Companies to publish permissible material requirements and installation arrangements • Section 15.4 Fire Sprinkler Systems;standardised statement • Section 18.1 Standard statement/requirement to provide policy • Section 18.2 Standardised Statements • Section 20 Local Practices; Sections added for Water Companies to add local practices

Feedback taken on board following the meeting and where possible those requests have been included within the document. The other changes made, are minor changes to grammar and layout. Previous work was done to remove a number of open text areas, creating more standardisation.

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